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Apple Sales Preserved: White House Vetoes ITC’s Ban

The United States Trade Representative (“USTR”) Michael
Froman, on behalf of the White House, has intervened in the patent dispute
between Samsung and Apple.Back in June,
the United States International Trade Commission (“ITC”) determined that some
of Apple’s older generation of products, including iPad 2 and iPhone 4 models
that operate on the networks of AT&T and T-Mobile, were in violation of
Samsung patents that cover methods of transmitting data.As a result, the ITC issued an exclusion
order that would have banned the importation and sale of the infringing
products.

Taking into consideration that the Samsung patents are
“standards-essential patents”, which the patent owner must offer under license
to competitors on “terms that are fair, reasonable, and non-discriminatory
(‘FRAND’)”, the USTR vetoed the ITC ban, explaining:

“After extensive consultations with
the agencies of the Trade Policy Staff Committee and the Trade Policy Review
Group, as well as other interested agencies and persons, I have decided to
disapprove the [ITC’s] determination to issue an exclusion order and cease and
desist order in this investigation.This
decision is based on my review of the various policy considerations … as they
relate to the effect on competitive conditions in the U.S. economy and the
effect on U.S. customers.”

The USTR also underscores that the decision to override the
ITC findings is based purely on policy considerations and not on the merits of
the ITC’s review:

“This policy decision is not an
endorsement or a criticism of the Commission’s decision or analysis. My
decision to disapprove this determination does not mean that the patent owner
in this case is not entitled to a remedy.On the contrary, the patent owner may continue to pursue its rights through
the courts.”

Samsung and Apple were quick to weigh in on this decision.
According to the L.A. Times, Samsung issued a statement expressing the following sentiment:

“We are disappointed that the
U.S. trade representative has decided to set aside the exclusion order issued
by the U.S. International Trade Commission. The ITC’s decision correctly
recognized that Samsung has been negotiating in good faith and that Apple remains
unwilling to take a license.”

Apple, on the other hand, “applaud[ed] the administration for
standing up for innovation in this landmark case. Samsung was wrong to abuse
the patent system in this way."

The
USTR has not similarly intervened in an ITC decision since 1987.

Full
text of the USTR’s veto letter, issued on Saturday, August 3,here[Update: This link works best by right-clicking to open it in a new window.]

A US company has been favoured over a non-US company in a very rare use of the veto. That raises certain questions, but the bigger issue of 'when can patent rights be over-ridden?' has also been raised. At some point patent rights need to be questioned as huge companies with billion dollar resources continue to fight with each other in this way.

When you say "The USTR has not similarly intervened in an ITC decision since 1987" do you mean by a similarly vague and unsatisfying explanation completely lacking in reason for how the policy objectives are met by the action at hand?

I've tended to side with Samsung over most of their disputes, but I think on this one I'm with Apple.

If someone has a patent there are a variety of things they can do with it. One approach is to say - "We're going to make the thing ourselves and not let anyone else do, as they're bound to mess it up". Another approach is to say - "We're happy for other people to make it as long as we get paid".

If a firm has taken the first approach you might expect the courts to give them an injunction if someone else starts to make the product. But if they've taken the second, the court may say that the firm clearly has no objection to others making the product, all that is required is that the infringers pay up.

If Samsung's patents are FRAND then they have presumably implicitly gone down the second route, so they don't get an injunction.

I don't think Samsung have necessarily chosen the latter of your two options. The options you present only work if one is considering them when no-one has already started to infringe ones patent. Once infringement has occurred, the options become: "do we stop this person infringing because we believe we have the right to control the technology we invented, or do we license the patent to the infringing party in order to ensure that they can continue to use it, but making sure that we get what we consider to be a fair payment?"

By labelling the IP as "standards-essential", USTR has effectively removed the first option. But (according to Samsung's comments) they only pursued the first option when the second was closed to them, by the refusal of Apple to accept a licence (presumably over what constituted FRAND terms).

If that's correct, one can assume that both have a very different view of FRAND - and now someone will have to arbitrate to resolve the issue. It will be interesting to see what observers make of the resulting agreement.

Whatever is agreed, it's worrying that this situation seems to be allowing Apple to use the USTR veto to hold FRAND negotiations to ransom - Samsung's ability to negotiate has been reduced by the removal of its bargaining chips.

And WRT the earlier comment about Apple not really being an American company - they're certainly perceived as being American by many people, so the public perception will be that USTR is protecting American business. Good for PR...

I think this paragraph from the dissenting opinion of one of the ITC Commissioner's is worth bearing in mind:

"Although licenses to non-FRAND-encumbered patents may certainly be included in a consensual resolution of a dispute over a FRAND-encumbered patent, it is neither fair nor non-discriminatory for the holder of the FRAND-encumbered patent to require licenses to non-FRAND-encumbered patents as a condition for licensing its patent. Cf.Lemley and Shapiro, A Simple Approach to Setting Reasonable Royalties for Standard-Essential Patents, Stanford Public Law Working Paper No. 2243026, at 18 (March 30, 2013) ("While the issue is not free from doubt, we think that an offer made conditional on the would-be licensee licensing any patents other than standard-essential patents reading on the standard at issue is not a FRAND offer.") (emphasis in original)."

Now that the US has chosen to ignore a decision by the ITC based on a patent right, one hopes that they will be more sympathetic to the compulsory licencing and revocation decisions presently happening in China and India on pharma cases to protect the domestic interests of those countries.

To me this is a "disturbance in the force" if you will. This just sets the standard now that if you have a big company and try to license out one of your patents and an infringer doesnt want it to pay and just co ti ues hsing it, then the US will just say "oh well, youre big, and theyre big anyways, patents dont really matter to you guys". I hope theres a way to appeal this decision, we dont need this standard, because soon it will be smaller companies dealing with this issue and then what's really the point of having your own patent in the first place?

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